IMF Executive Board Completes Fifth Review Under PRGF Arrangement for Haiti and Approves US$24.5 Million Disbursement and Extension of Arrangement

Press Release No. 09/244
July 2, 2009

The Executive Board of the International Monetary Fund (IMF) completed on June 29, 2009, the fifth review of Haiti's economic performance under the Poverty Reduction and Growth Facility (PRGF) and approved an extension of the arrangement through the end of January 2010, from November 2009.

Completion of the review enables Haiti to receive an immediate disbursement of SDR 15.79 million (about US$ 11.8 million), bringing total disbursements to SDR 114.66 million (about US$178 million).

The Executive Board also decided that Haiti has made sufficient progress to reach the completion point under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative, and also qualifies for debt relief under the Multilateral Debt Relief Initiative (MDRI) (see Press Release No. 09/243).

The three-year PRGF arrangement was approved in November 2006 in the amount of SDR 73.71 million (about US$114.4 million; see Press Release No. 06/258). In June 2008, the Executive Board approved the first augmentation under the PRGF arrangement to SDR 16.38 million (about US$25.4 million; see Press Release No. 08/145) to help Haiti cope with the impact of high international food and fuel prices. A second increase in financial assistance to SDR 24.57 million (about US$38.1 million), was approved by the Executive Board in February 2009 to help mitigate the negative effects caused by a series of hurricanes in 2008 as well as the global downturn (see Press Release No. 09/34).

“The Haitian authorities are to be commended for maintaining macroeconomic stability and for their good performance under the PRGF-supported program, despite a succession of external shocks and the impact of the global crisis.

“The Haitian authorities are facing difficult challenges. The global downturn is affecting Haiti largely through the impact of lower commodity prices on fiscal revenue. Remittances, a critical lifeline to many Haitian families, have remained flat in recent months, while lower import prices have driven inflation to very low levels. The PRGF-supported program has been modified to preserve priority public investment spending needed to support job-creation and growth through the rest of this year, with the higher fiscal deficit being financed through exceptional central bank financing. The central bank should stand ready to sterilize central bank financing as needed and continue to enhance the effectiveness of its instruments.

“HIPC and MDRI debt relief will create fiscal space for poverty-related spending, but Haiti’s risk of debt distress will remain high, even after debt relief. Therefore, new borrowing policies must remain cautious. Ongoing efforts to enhance the quality and efficiency of public spending should continue, also with a view to helping mobilize donor support. New tax measures and strengthened revenue administration will also help increase domestic revenue from its current low level.

“It will be important for the international donor community to provide timely and adequate financing to support the authorities’ reform efforts,” Mr. Kato said.